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Waking Up To The Pension Crisis

October 21, 2004

It is finally dawning on many of my fellow Britons that pension provision is an important issue. In my view, what is needed now is real vision and political leadership at how pension provision should develop in the next 20 to 30 years and beyond.
In the recent debate in the House of Commons on pen…

It is finally dawning on many of my fellow Britons that pension provision is an important issue. In my view, what is needed now is real vision and political leadership at how pension provision should develop in the next 20 to 30 years and beyond.

In the recent debate in the House of Commons on pensions a number of my parliamentary colleagues from all parties referred to the need for consensus. I could not agree more. If we accept that our collective?and, indeed, our individual?pension shortfall will be a major problem in future decades, we need to create a consensus among the political class on the correct way forward.

One of my great concerns about pensions is the real risk of a battle between the generations. History shows that almost every generation has been able to look ahead in the hope and confidence that, except perhaps in time of war, economic life gets better for progressive generations; but no longer.

Part of the problem is down to what has been described as the demographic time bomb, but there is also the perception that in order to maintain the somewhat unrealistic and often uncosted expectations of an older generation, those either in their 20s or not even among the work force today will have an increasing burden to bear.

At 40 years of age I still consider myself relatively young and I believe that my generation lacks confidence in the whole area of pensions. Much has been said recently about the idea of compulsory saving. But the recent history of mis-selling scandals and difficulties with organisations such as Equitable Life makes it very difficult to make a supportable case in favour of compulsory saving. The lack of confidence among many would-be savers is tangible. Only if the pensions industry can be made much safer can we seriously contemplate compelling people to place their trust in it.

Amid all the talk on compulsion, there is also a lack of appreciation of why so many people fail to make provision for their future. No amount of new legislation and no new initiatives will overcome the fact that many people in Britain today are too poor to make adequate savings for their retirement much beyond the state pension. I believe that compulsory saving can be only a small part of the solution.

Much has also been said about the possibility of raising the retirement age. I must confess that I take on board the concerns about the difficulties this would impose upon hard-working manual labourers. It is perhaps easier in a predominately service-based economy, such as in this constituency of the Cities of London and Westminster, to think of 70 as an age at which people could continue to work, but it is much more difficult for those who have carried out heavy manual work either in the agricultural industry, building or manufacturing. We need to get that right.

Most of all I believe that we have to ensure that there are realistic expectations about retirement payments. Pensioners may well have “paid their stamp” over the years, but the truth is that very few have contributed anything like enough to justify receiving the state pension for the number of years that many require it, less still the increasingly expensive health care or other welfare benefits. However, we are where we are and no one can seriously expect pensioners to go back to work. I believe we need to recognise for the current generation of pensioners and soon-to-be pensioners the reality that such older folk feel insecure about what the future holds. Their interests must be properly looked after.

We must all face facts and I believe that many young people are more realistic about what they can expect from the State in later life. As a nation we cannot go on as we have over recent years hoping, it seems to me, that all will be well in the end.

The recent report to Parliament on this important subject was more than a wake up call. I hope it will provide a basis for a long-term plan for decades ahead which will be rigorous enough to earn a full cross party political consensus. We must stop the escalating expectations of people in this country that there is a bottomless pot of money to take care of anyone who has eschewed any sort of personal saving relying solely on younger taxpayers alone to see them through later life.